Port charge faces possible challenge in NJ legislature

Thursday, May 30, 2013

A $4.95-per-TEU fee implemented by the Port Authority of New York and New Jersey in March 2011 that is already the subject of a complaint before the U.S. Federal Maritime Commission faces a new challenge in the New Jersey state legislature.
The port authority implemented the Cargo Facility Charge in 2011 to help pay for road and rail infrastructure, as well as security at the port. (There is also a $1.11 charge on automobiles and 13 cents per metric ton on other cargo.)
Identical bills, S.2747 and A.4170 were introduced this month in the New Jersey Senate and Assembly by Sen. Robert M. Gordon and Assemblywoman Linda Stender, respectively.
They would prohibit the port authority from imposing a cargo facility charge on users unless it's done “upon written mutual agreement between that user, ocean common carrier, or marine terminal operator and the port authority.” The bill said “ elimination of cargo facility charges at port authority ports will make the port authority more competitive with other ports located along the eastern seaboard of the United States” and is dependent on enactment of a similar law by the state of New York.
Gordon, vice chairman of the transportation committee in the New Jersey Senate, said he also has broader concerns about the efficiency of the port authority and how it spends its money. After the bi-state agency announced large toll increases in 2011 for the bridges and tunnels it operates, he introduced legislation calling for additional audits and oversight of the agency, but that bill was conditionally vetoed by New Jersey Gov. Chris Christie last year.
In their FMC complaint, COSCO, Evergreen, China Shipping, Hanjin, Horizon Lines, “K” Line, NYK, United Arab Shipping, and Yang Ming complained the fee “is unlawful because complainants do not receive services commensurate with the fee because it severely and unreasonably prejudices complainants while unduly preferring other users of the port facilities and because the cargo facility charge and the rules applying it provide for unlawful expulsion of the complainants from the port.” (COSCO and Evergreen withdrew their names from the complaint last November.)
Doug Morgante, national director of state government relations at Maersk Line, made a similar point in an interview this week, saying that one segment of the shipping industry, the container carriers, are absorbing the fee. He said it is difficult for carriers to pass the fee along to shippers.
“When the port authority imposed this fee they, assumed it could easily be passed on to the end user—the end user being you and I,” he explained. In that case, the fee would amount to cents or fractions of a cent on a new pair of shoes or television, for example.
Because carriers don’t have leverage over shippers, Moragante said the fee never gets passed on to the shipper.
“It’s a very competitive business, which makes it commercially impractical in most cases for carriers to convince their customers to pay a fee which is described in the port authority’s tariff as a fee imposed on ocean carriers,” he explained
An earlier bill, S. 2325, introduced last November in the New Jersey Senate by Sen. Joseph Pennacchio, would instead require the port authority to contract with an independent third party agency to collect cargo facility charges from all users, but prohibit the imposition of such a charge on ocean common carriers and marine terminal operators.
James H. Cobb Jr., director of government relations for the New York Shipping Association, said that act would give carriers some leverage in collecting the fee.
A port authority spokesman declined to comment on the legislation when contacted Wednesday, but Richard M. Larrabee, director of the Port Commerce department, discussed the charge in January at a seminar sponsored by the American Association of Port Authorities and U.S. Maritime Administration. He said it generates about $30 million per year.
He compared it to the passenger facility charge imposed by airports that can be used to fund infrastructure improvements for growth.
“We believe that concept makes sense in the maritime industry,” he said, saying the industry does not have a reliable funding source for improvements that have to be made at ports but do not generate revenue—such as dredging and construction of roads.
“It certainly doesn’t pay for everything, but it is a step in the right direction,” he said.
Chairman of the ports subcommittee of the Maritime Transportation Systems National Advisory Committee, Larrabee noted the group recommended to the U.S. transportation secretary that the country create a national freight strategy and a “reliable source of funding” for ports similar to what airports and highways have.
“The simple principle that freight should pay for itself is one that we believe should be embraced in this national freight policy,” he said. “If we are significantly reducing the cost of transportation, as we have over the last 15 years, shouldn’t the people who benefit from that in some way be willing to pay for part of the investments that were made.” - Chris Dupin